In the first half of 2022, oil prices and energy stocks saw a strong bull market, while equities, bonds, and other assets were all under pressure.
However, certain circumstances have resulted in a decrease in both growth rates.
The Energy Select Sector SPDR ETF (XLE) has also suffered, albeit its losses aren’t as severe as crude oil’s. The XLE stocks are down 25.5% from their peak in the second quarter and are down almost 3% this quarter.
How do they seem to head into the fourth quarter?
Oil Stocks Trading in the Fourth Quarter
The daily chart for crude oil illustrates a handful of significant changes. It did a decent job early in the quarter of maintaining the $95 level and the 200-day moving average, but $100 was serving as resistance.
Once support was lost, the 21-day moving average became resistance. That is the current trend, as oil prices have fallen below the 2021 high and are trading at their lowest level since January.
I’m curious to see if the $77 level, which represents the 78.6% retracement, holds up. If oil recovers, watch how it reacts to the dropping 10-day and 21-day moving averages, which have been active resistance (particularly the latter).
Back above these levels, $90 and the 50-day are in play.
On the downside, $65-ish seems to be a long way off — and it is, as it would represent a 15% drop from current levels — but if we see it in the next few months, it should be sturdy support.
Energy Stocks Trading in the Fourth Quarter
In terms of XLE stocks, investors should keep a watch on Exxon Mobil (NYSE:XOM) and Chevron, both of which have 22.6% and 20.7% weightings in the portfolio.
The 50-week moving average has provided excellent trend support for the XLE stock for more than a year. This legislation, however, is currently rejecting the ETF.
If the XLE does rally, I’d want to see it retake the 50-week moving average first. Whether it can accomplish that, I’d want to see if it can challenge the sliding 10-week moving average.
If the XLE continues to fall, I expect a retest of the $66 level, which is close to the July low. The 38% retracement from the all-time high to the covid low of 2020 is also there, as is the 200-month moving average.
The $58 to $59 zone comes into play below that. Early in the year, it was a crucial breakthrough point and the 50% retracement of the previously described range.
Featured Image- Megapixl @ Zimmytws